Which of the following statements is CORRECT?
A) In general,if investors regard a company as relatively risky and/or having relatively poor growth prospects,then it will have relatively high P/E and M/B ratios.
B) The basic earning power ratio (BEP)reflects the earning power of a firm's assets after giving consideration to financial leverage and tax effects.
C) The "apparent," but not necessarily the "true," financial position of a company whose sales are seasonal can change dramatically during a given year,depending on the time of year when the financial statements are constructed.
D) The market/book (M/B)ratio tells us how much investors are willing to pay for a dollar of accounting book value.In general,investors regard companies with higher M/B ratios as more risky and/or less likely to enjoy higher future growth.
E) It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.

Question

Quizplus · Accepted Answer

The statement about the "apparent" financial position of a company with seasonal sales changing dramatically during the year is correct because the financial performance and position of such companies can vary significantly depending on the season in which the financial statements are prepared. This is due to fluctuations in sales, inventory levels, and cash flows associated with the seasonality of their business.

Which of the Following Statements Is CORRECT